The Japanese video game market is one of the biggest and most mature video game markets worldwide, expected to reach a size of almost 1.8 trillion Japanese yen by 2026. Japanese companies have played an important role in shaping the global video game industry at least since the 1980s, when the success of the Nintendo Entertainment System (NES) helped to revive an ailing U.S. gaming market. In 1989, the introduction of the Game Boy revolutionized the handheld sector. Since then, both home and handheld consoles enjoyed a high popularity among Japanese consumers.
The rivalry of the big three console makersThe markets for both types of devices were driven by changing rivalries over the decades, which furthered competition and the innovation of new products. While the early 1990s were marked by the rivalry between Sega and Nintendo, the entry of Sony in the mid-1990s and Microsoft in the early 2000s established today's competition of the global home console market. Since then, Sony's PlayStation and Microsoft's Xbox have become well-known gaming brands. In recent years, the Japanese home console market was split between Sony's PlayStation 4 (2014), Microsoft's Xbox One (2014), and Nintendo's Switch (2017), while the handheld market was split between the PlayStation Vita (2011), the Nintendo 3DS (2011), the Nintendo 2DS (2016), and the Nintendo Switch Lite (2019). In November 2020, the release of the PlayStation 5 and Xbox Series X ushered in the newest generation of home consoles. In the form of the PlayStation 5 Digital Edition and the Xbox Series S, downgraded but more affordable versions were released as well. While the competition between the three manufacturers is more evenly distributed in other national home console markets, Nintendo and Sony clearly dominate their home market.
Competition in the form of smartphone gaming and recent developmentsDespite their historical significance for the video game industry, classic video game consoles were in a long-term decline until 2017, when the successful launch of the Nintendo Switch contributed to the first growth of sales revenue in many years. One reason for the decline is thought to be the rise of the smartphone, which is the most popular gaming device in Japan today. While home consoles offer a different form of gaming experience and are therefore somewhat protected from the competition posed by games on smartphones, mobile gaming had a particularly adverse effect on handheld consoles. Sony confirmed in 2019 that the company had no plans for a future handheld console. Nintendo remains active in this area both with the Nintendo Switch, which can be regarded as a hybrid between a home and a handheld console, as well as the Nintendo Switch Lite, which can only be used as a handheld console, but is able to run the same games as the Nintendo Switch. These two consoles were joined by the Nintendo Switch OLED Model, an upgraded version of the basic model that was released in October 2021. In addition to hardware sales, the popularity of the Switch can also be seen when it comes to software: Games for the Nintendo Switch dominated the yearly ranking of best-selling video games for consoles. The increased demand for media entertainment due to the advent of the coronavirus (COVID-19) pandemic in 2020 led to higher participation rates both for home and handheld consoles as well as an increase in average household spending on gaming consoles and related software, which was additionally furthered by the release of new consoles during that year.
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